2003 (2) TMI 438 - AT - VAT and Sales Tax

Issues Involved:
1. Validity of the clarification issued by the Special Commissioner and Commissioner of Commercial Taxes, Chennai-5, dated September 19, 2002.
2. Classification of grinding wheels and related items for tax purposes.
3. Applicability of the rule of "contemporanea expositio."
4. Invocation of writ jurisdiction under Article 226 of the Constitution despite the availability of an alternative remedy.

Detailed Analysis:

1. Validity of the Clarification Issued by the Special Commissioner and Commissioner of Commercial Taxes, Chennai-5:
The petitioners challenged the clarification issued on September 19, 2002, which classified grinding wheels and other items under entry 18(xii) in Part E of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, taxable at 16%. The tribunal scrutinized this clarification, considering the functional character of the products. The tribunal found that the clarification was not proper as it did not align with the predominant and preferential use of the materials. The grinding wheel, primarily used for grinding, shaping, and polishing, could not be classified under materials used for painting and varnishing.

2. Classification of Grinding Wheels and Related Items for Tax Purposes:
The tribunal examined whether grinding wheels should be taxed at 11%, 12%, or 16%. Initially, grinding wheels were taxed at 11% under entry 33 in Part D, later changed to 12% under entry 49 in Part DD. The impugned clarification reclassified them under entry 18(xii) in Part E, taxable at 16%. The tribunal concluded that grinding wheels do not fit under entry 18(xii) as they are not materials used in painting or varnishing. The tribunal emphasized the importance of the functional character of the product, as understood in trade by dealers and consumers.

3. Applicability of the Rule of "Contemporanea Expositio":
The assessing officer justified the clarification based on the rule of "contemporanea expositio," which allows interpretation of statutes by contemporary authority. However, the tribunal held that this rule could not be applied to the impugned clarification, as the language of the statute was plain and unambiguous. The tribunal cited the Supreme Court's decision in J.K. Cotton Spinning and Weaving Mills Ltd. v. Union of India, emphasizing that legislative intent should adapt to new facts and situations only if the words are capable of comprehending them.

4. Invocation of Writ Jurisdiction Under Article 226 of the Constitution:
Despite the availability of an alternative remedy, the tribunal entertained the writ petitions. The petitioners argued that the remedy by way of appeal was not efficacious, citing the Supreme Court's decision in Indian Hume Pipe Company Ltd. v. State of Uttar Pradesh. The tribunal acknowledged that exceptional circumstances warranted invoking writ jurisdiction. The petitioners had paid the admitted tax without default, and the validity of the clarification needed affirmation by a competent court or tribunal.

Conclusion:
The tribunal set aside the proceedings of the Special Commissioner and Commissioner of Commercial Taxes, Chennai-5, dated September 19, 2002. The assessment orders for the years 1998-99 and 1999-2000, which levied tax at 16%, were also set aside. The assessing officer was directed to follow the tribunal's directions while levying tax on these items. The tribunal emphasized that clarifications issued by the government represent their understanding of statutory provisions and are not binding on courts. The tribunal ordered that this judgment be observed and executed by all concerned.

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